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Following is the speech by the Chief Executive, Mr Donald Tsang, at a luncheon hosted by the Royal Institute for International Relations in Brussels today (November 7, Brussels time):
Distinguished guests, ladies and gentlemen,
Thank you for this opportunity to join you today. It is heartening to see that interest in our part of the world - and in particular, our small corner of it - remains strong in Europe, especially here at the heart of the European political and economic system.
I know that the Institute will celebrate its diamond anniversary next year - so, my best wishes in advance for such an achievement. Next year, we in Hong Kong also celebrate an important milestone - our 10th anniversary as a Special Administrative Region of China. Today, I would like to give you an update on Hong Kong as we approach the 10th anniversary of our Reunification, and what the future holds.
What has happened in Hong Kong over the past 10 years, and what will happen 10 years hence, is not solely about our city of seven million. It is part of a much larger story playing out on the global stage, and that is, the emergence of China as a major economic and political force. Throughout recent history, Hong Kong has enjoyed a dress-circle seat in this absorbing drama. We have been both observer and player as China re-engages the world. Now, almost 10 years after Reunification, the curtain is rising on a new stage of development for Hong Kong. A stage of development that will see us deepen our links with the world, as well as within our own country. A stage of development that embraces the opportunities flowing from increased globalisation, as well as the fast-developing domestic market in the Mainland of China.
This is the parallel course - of an international city, of a Chinese city - that Hong Kong has been navigating since Reunification in 1997. It is a course that has at times seemed contradictory - looking out to the world while at the same time looking in towards our own country's development, and the role we might play in it. It is a course that has aroused a great deal of soul-searching in Hong Kong, especially at times such as the Asian financial crisis or the SARS tragedy when many were wondering: "Where to from here?"
The fact that it has taken us almost 10 years to feel comfortable in this new identity is not surprising, given the long separation under colonial administration and the nervousness and uncertainty we were all feeling in the run-up to July 1, 1997. Not in a negative sense by any stretch. More in the sense of "How do we make this unique concept of 'One Country, Two Systems' work?" We have the Basic Law, which provides the legal and constitutional framework for our existence as a Special Administrative Region of China. But we had to work out for ourselves what it meant in practice - the essence of Hong Kong people running Hong Kong with a high degree of autonomy. How do we handle our relationship with the sovereign? How does the sovereign handle its relationship with us? How do we maintain our role as an international centre for finance, trade, commerce, transport, logistics and professional services? How can we contribute to our country's development?
These are some of the fundamental questions we had to address over the past decade. We are still working on some of them. I believe that fully implementing the spirit of 'One Country, Two Systems' will continue to be an important task for the Chief Executive of Hong Kong. I also believe that after much hard work and effort on our part as well as tremendous support and goodwill from our national government, this novel constitutional arrangement is now well entrenched. We have a newfound confidence based in part on the feel-good effect of a fairly robust economic situation but mainly on a much stronger understanding of our identity and purpose. And with that understanding comes the self-assurance to pursue a course that we believe best suits our strengths and advantages, as well as the national interest.
On the one hand, Hong Kong is firmly positioned as Asia's world city - a progressive, stable and free society. We continue to leverage the institutional strengths that set us apart in Asia - the rule of law upheld by an independent judiciary, a level playing field for business, the free and unfettered flow of information and capital, and a clean, efficient administration.
We continue to engage the world, and encourage business and people from all corners of the globe to engage us. We are constantly working to hone our strengths and entrench our position as a major centre for international finance, shipping, trade, logistics and tourism in the Asian time zone. We have our own freely convertible and trusted currency, with a stable exchange rate linked to the US Dollar. Our low taxes and simple taxation remain a major draw-card for multinational corporations. We are now home to more than 3,800 international companies which use our city as a base for regional operations - add another 2,500 if you include the local offices of overseas companies. More than 500,000 foreign passport holders now call Hong Kong their home.
We have the world's busiest airport for international air cargo, and we actively seek to expand our air services agreements to boost the connectivity of our international and intra-China passenger and cargo services. Our container port is one of the busiest and most efficient you will find anywhere.
We play an active role in international fora such as the World Trade Organization and APEC in our own right. We have a network of overseas offices covering Asia, North America and Europe. We will soon be opening a new office in Berlin to enhance our presence in Eastern Europe. We have been consistently rated the world's freest economy by major international think tanks such as the Heritage Foundation and the Cato Institute.
Now, more than ever, Hong Kong remains an international, cosmopolitan, East-meets-West, 24-7 city. We are a global city, fully connected to the globalised world.
On the other hand, we are an inextricable part of China. About 95% of our population is ethnic Chinese. Our ancestors came from Guangdong and further afield. We have family and friends living in the Mainland of China. We share the same culture and language. Our business people have substantial interests in the Mainland - in fact, Hong Kong entrepreneurs are the largest external investors in China, with total investment of ýÿ212 billion. About 80,000 companies with Hong Kong connections have operations in the adjoining Guangdong Province alone, employing about 11 million people - more than three times our own workforce in Hong Kong.
Our national government certainly understands Hong Kong's crucial role in China's economic growth. Our country's 11th Five-Year Plan recognises our pillar industries - financial services, logistics, tourism and information services - and upholds Hong Kong's status as an international centre for finance, trade and shipping. To cite one example, the State Council is actively pursuing the expansion of renminbi business in Hong Kong - we are a testing ground for the internationalisation of the renminbi because we have the requisite financial infrastructure for the experiment. So, Hong Kong is not just another Chinese city, but a Chinese city with a unique and irreplaceable role in our nation's development.
I convened an Economic Summit in Hong Kong two months ago to address the challenges and opportunities presented by our country's Eleventh Five-Year Plan. In collaboration with leaders in our business, labour and professional sectors as well as eminent academics in local universities, we are drawing up an action agenda, to be ready by early next year, to chart an economic path forward for Hong Kong.
While we react and re-adjust to the domestic developments within our country, we must also react and re-adjust to the effects of globalisation on our country. For more than two decades after China introduced its opening up policy, Hong Kong has enjoyed an almost exclusive franchise as the gateway to overseas trade and investment in the Mainland of China - and we have prospered as a result.
However, since China joined the WTO at the end of 2001, that particular advantage has been under challenge. Nowadays, more companies are exploring the direct route into the Mainland market. Within a month or so, China's five-year window to fully implement its WTO commitments will come to a close. The new dynamics of a China fully plugged into the rules-based global trading system will present an unprecedented challenge to Hong Kong's position - as well as unprecedented opportunities. We are no longer just a gateway into the Mainland of China - we are more of a revolving door that ushers in trade and investment into the Mainland from Hong Kong and abroad, while on the return spin takes trade and investment from the Mainland out to Hong Kong and abroad. And it is the gyroscope of mutual interests for the world, for China, for Hong Kong, that keeps it spinning smoothly.
One of the best examples of how this interplay works is our Closer Economic Partnership Arrangement with the Mainland. We call it CEPA for short and it is akin to a free trade pact between China and Hong Kong. This is possible because under 'One Country, Two Systems', both Hong Kong and China are members of the WTO in our own right. CEPA provides tariff-free access to the Mainland of China for Hong Kong manufactures, as well as early or enhanced access in 27 services sectors. CEPA has given Hong Kong companies early access to the Mainland market before China's full WTO commitments come into play. And when I say 'Hong Kong companies', I mean any locally incorporated subsidiary of an overseas company is treated the same as a local company. In other words, the level playing field for business that I mentioned earlier applies to all companies - international and local - incorporated in Hong Kong.
Even after China's WTO commitments are fully implemented, CEPA still offers supra-WTO access for manufactures and most services sectors. In addition, we are in constant dialogue with the Mainland authorities on further liberalisation measures for Mainland and Hong Kong companies. Since it was implemented in 2004, more than 1,000 Hong Kong companies have applied for service supplier certificates, of which more than 120 are from EU-linked corporations. And our domestic exports to China have revived and are increasing steadily. So, CEPA has worked for Hong Kong.
On the flip side, CEPA has allowed the Mainland of China to catch an early glimpse of what its market will look like when the full WTO discipline kicks in, especially in key and coveted sectors such as banking, insurance, legal services, securities and futures, advertising, accounting, transport and logistics and management consulting. It has allowed the Mainland to upgrade its services sector and management capabilities ahead of an influx of overseas players. This in turn will provide a solid foundation for the next stage of post-WTO economic development. So, we have both benefited, in complementary ways.
Another example of the ever expanding economic ties between Hong Kong and the Mainland of China is the Pan-Pearl River Delta initiative, or Pan-PRD initiative for short. This brings together the nine southern provinces of China plus the two Special Administrative Regions of Hong Kong and Macau. Working together, we seek to unleash the economic potential of a huge, integrated economy in southern China - a market of more than 470 million people, which is about the same size as the EU.
China is not a unified market by any means - it is an agglomeration of markets with differing customs and business procedures in different provinces and even in different cities of the same province. Under the Pan-PRD initiative, we are striving to break down these non-tariff barriers to trade and investment, thus enhancing the flow of talent, capital, goods and people within this economic caucus. Hong Kong provides capital, international know-how and global connectivity. Our Pan-PRD partners provide other resources - land, abundant labour, local market know-how and enhanced market access. A complementary relationship is fast developing between Hong Kong and the Pan-PRD region that allows full play of the two sides' respective strengths and advantages.
Co-operation between Hong Kong and the Mainland extends beyond trade, commerce and investment. It also embraces co-operation in diverse areas ranging from infrastructure, education and culture, IT, environmental protection, tourism, to public health and prevention of infectious diseases. So Hong Kong is not only helping our country to engage the world on the economic front, we are also deepening engagement within our own country across a wide spectrum of important sectors. The increased government-to-government contacts has engendered enhanced understanding in the Mainland of what underpins Hong Kong's success as a world city, and a deeper appreciation in Hong Kong of the relative strengths of the Pan-PRD provinces as well as enhanced avenues for cultural, tourism and professional exchanges. We believe that the Pan-PRD initiative can serve as a model for ongoing economic liberalisation and opening up in the rest of the country.
The upshot of all this is that Hong Kong is now poised to enter a new phase of development, a phase of development firmly underpinned by a competitive advantage that is second to none in Asia. We have the international connections, the experience and the global outlook to continue as the premier international business hub in East Asia. We have CEPA, which gives us enhanced access to the China market for our goods and services. We have the Pan-PRD initiative, which will unlock the huge economic potential of a vast market - with Hong Kong providing the high-end business services and the management of capital flows. And, we have a clearly defined role in our country's development blueprint for the next five years.
Ladies and gentlemen, the implementation of 'One Country, Two Systems' has added another dimension to our recipe for success on top of our role as Asia's world city - our role as the most open, free and international city in China. 'One city, two roles'. We have come a long way, and achieved much, since Reunification in 1997. I am most certain of one thing - that this first decade as a Special Administrative Region of China has laid the foundations for even greater achievements in the future.
Thank you very much.
Ends/Tuesday, November 7, 2006
Issued at HKT 20:45
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